Motorola's Investment In China example essay topic

1. Introduction An increasing amount of attention is being paid in the literature to business Guanxi or relationship in Asia particularly in the business dominated economies of the Hong Kong, Singapore, Taiwan and the People's Republic of China. Chinese business relationships and contracts that needs to be understood and worked within to successfully conduct business and management in most countries in the region. However, the attention is directed to the different perspective on the importance of guan xi to business practices and possible impacts of the guan xi on western firms's success in China.

In order for western firms to enter China market, they have to confront with complex and constantly changing ethical percepts in China (Wu, 1999) and different types of guan xi not only exist but also can be harnessed in an ethical fashion to create wealth (Leung et al., 1999). Dates back to the mid 1980's, Motorola's presence operates the largest owned subsidiary in China and had moved their country from a centrally planned economy to a market economy. The Motorola has invested in China for a decade and is so far the largest foreign investor in China. Therefore, guan xi has an impact on Motorola to be an established company in China compared to their competitors, Siemens and Nokia. The limitation on this research is addressed. The continuous development and changes in market condition in China is of a certain period of time.

This is because it needs to be adapted to fit the prevailing situation at that time. Moreover, interview session is difficult to conduct as the research is on Motorola-China and therefore it is heavily rely on secondary sources. 2. Guanxi's implications to practices In recent decades, there have been several fundamental concerns for western companies in China. For the Motorola, they learn how to manage a socialist workplace culture in which employees depend on their state-run employers for housing, food transportation and other necessities. The managers also have to baffle by guan xi, the vulnerable Chinese practice of developing and nurturing intricate networks of personal relationship.

Nevertheless, priority is sometimes given to them over bottom-line performance. As China is admission to the World Trade Organisation (WTO) in 2001, it has reduced tariffs and business prospects are likely to grow even more promising. In China, standard incentives given to foreign enterprises include a complete income tax exemption for three years with a fifty percent exemption for a further two years and a business tax rebate. According to sales volumes, China's high-tech parks and zones usually offer faster customs clearance and other shortcuts through red tape that makes life easier. For instance, it allows Motorola to generate greater market access for lower tariffs and guan xi for further flexibility. For example, Motorola managed to cope with the tight market in part by utilizing the Chinese practice of guan xi due to the China's effort to promote business-education programmes, multinational operation that are growing rapidly.

In addition, the company learned that retention tactic favoured in the west such as rewards does not apply well in China because financial markets are very tightly controlled by the government. Therefore, they have changed the policy to health insurance and other benefits that are more powerful selling point for recruiters in China (Ahlstrom, 2004). Contemporarily, multinationals are moving aggressively to localize their operation in China by hiring Chinese talent to fill expatriates. Thus, the Motorola shift to localize management and cultural issues to handle talent wars. The importance of guan xi is realized when the expatriate managers were unwilling to pass knowledge along to the Chinese because they wanted to hang on their jobs.

According to Xing (2003), they resolve this problem by adopted the Chinese policy by giving the expatriates an additional incentive such as better jobs or richer retirement benefits if they helped localized Chinese operations. As a result the foreign expert were very glad to train the local staffs. This practice results because the company realize that these talents know Chinese language and have superior cultural skills, such as utilizing guan xi networks and dealing with local political official (Liebert hal, 2003). Ahlstrom (2004) stated that multinationals also could boost retention by capitalizing on another aspect of Chinese culture that is employees's trong loyalty to their families, which is typically far stronger than their link to any employer or organization. Hiring the wife of a valuable employee, for example, might be viewed as unseemly nepotism in the United States, but in China it can be a way of cementing the tie between that employee and the company. On the other hand, having a good understanding of Chinese culture and business practices are most essential factors to do business in China (Chen, et. at., 1994).

Thus, a conceptual framework for testing business effectiveness of venture operation in China is developed as in the Figure 1 below (Appendix 1, p 13) Figure 1: Conceptual Framework Former Motorola human resources manager Greg Wang (2004) says that guan xi is perhaps more universal than is widely known. Several recent reports on recruiting in the United States show that employee-referral programs are by far the most effective way of hiring outside recruits. Motorola, whose Chinese operation has 12,000 employees and accounts for 15 percent of the company's total revenues, has been especially successful with its localization efforts. In 1994, 11 percent of the company's middle managers were Chinese nationals. Today, the number is 84 percent.

On the other hand, the company do learned to respect 'face' in order to build good relationship in China. This is because 'face' issue is an essential component of the Chinese national psyche. It denotes the general tendency of Chinese people to do business with long-term orientation. With good relationship, Motorola can always find a better solution when unexpected circumstances occur and excused for future business improvement.

It can be better off with goodwill and friendship than signing a contract. Motorola realized that a well-established guan xi is built on the basis of mutual trust and giving face to one another but it cannot be overused and the favours will have to be reciprocated in one way or another. According to Luo (2004), foreign investors could gain a competitive advantage in the Chinese market by building and nurturing a guan xi network. It concluded that guan xi has a significant and positive impact on firm's efficiency and effectiveness.

However, for foreign-invested enterprises the effect would be found less prevalent due to difference in operating and characteristics. For example, Motorola joint venture with local (China) would have greater excess to guan xi network rather than wholly owned foreign operation. Motorola would be able to benefits from cheaper suppliers, easier entry to markets, favourable taxation treatment and greater assistance from authorities with problems. The company practice the importance of maintaining guan xi relationship and expedite business transaction would be an advantage in their business sales. As a result of entered business in China, Motorola has indirectly learnt the Chinese culture that varies in the west.

The appreciation has led them to conduct business smoother in China as guan xi is important when it comes to Chinese. 3. Success of Motorola in China 3.1 Guanxi built through Investment in China China investment environment factors including political conditions, stages of economic development, social-cultural and technology conditions may still have significant influences on foreign firms' future FDI activities in China. The overall investment environment should continue to improve and the Chinese government is likely to remove restrictions on local market access. However, market mechanisms might be used to back up its local enterprises while continuing to encourage foreign direct investment into China.

When guan xi is built the Motorola has the confidence to do business in the long-term orientation and therefore investment would be vast. Motorola and the Tianjin municipal government announced approval of Motorola's planned 16 billion RMB (US$1.9 billion) investment for semiconductor manufacturing and telecommunications facilities in China. This move brings Motorola's total China investment to 28.3 billion RMB (US$3.4 billion). It also establishes Motorola as the largest foreign investor in China and supports the company's strategy to manufacture both in the U.S. as well as in the other major markets it serve. According to Gavin (2004), the chairman and chief executive officer (CEO) of Motorola, the company has a long, valued relationship with the people in China.

This latest investment builds on that historical commitment and significantly strengthens our partnership with the people of China to create new business opportunities. The CEO of Motorola also stated that because of their confidence in China's continued development and growth they committed to invest in China in 1987. The optimism has been validated as the rapid expansion they have foreseen in the telecommunication industry and other consumer sectors. The Tianjin Mayor Li Sheng-Lin (2004), the people of China and Motorola have been friends for many years. China welcomes this investment and the prosperity helps to bring Tianjin and China to economic growth. The highlight of the investment would be the Motorola Tianjin integration semiconductor manufacturing complex.

The new site focus on pr semiconductor solutions to support wireless communications devices, automobile electronics and other advanced consumer products. By building total system at its strategic range of facilities in China, Motorola will be able to more quickly respond to customer's needs in the region. The resulting growth should be strengthen economies and stimulate employment opportunities and exports from both China and the United States. Gavin (2004) noted that the site would become one of the largest integrated semiconductor manufacturing facilities in the world and the most advanced in China. The site will be the key contributor towards moving Motorola closer to their customer in China and Asia as those markets continue to expand. Motorola currently has 10,000 employees in China.

The company has 18 research centers and labs in China, collectively known as the Motorola China Research and Development Institute. The company employing more than 800 researchers at a total investment of 1.5 billion RMB (US$180 million). Moreover, Motorola is working on several design projects with eight of the leading Chinese universities and agreements with more than 175 local suppliers. In recent years, many workforce-management issues have changed, in part because of the growth of Chinese business schools, which are partially subsidized by multinationals. Motorola, for example, established its own Motorola University program in Beijing in the early 1990's to provide its Chinese employees with business school training. One component of that curriculum, the year-and-a-half-long China Accelerated Management Program, includes classroom work, a rotation through various jobs at the company, mentoring by expatriate coaches and an opportunity to shadow a middle manager on the job.

In addition to training its own employees, however, Motorola has helped improve the larger pool of potential management candidates by underwriting another program, in which more than 200 instructors teach 130 different business courses at various Chinese universities. Multinationals also are required to pay a fee and usually is around $1,500 to $2,000 per student to compensate universities for the cost of training the graduates they hire. Motorola's investment in China shows the stability of business is running well in China market. In order to expand the business, Motorola has subsidized the universities to encourage people to obtain knowledge to use in Motorola's research and development. Aid programmes form Motorola encouraged the development of legal skills and reform.

3.2 Well management in workforce When guan xi is built, the pathway to success is foreseeable for a foreign company to market its business in China. In addition, trust is essential to long-term guan xi maintenance. This can only come about if there is genuine attempt on the part of the foreign investors to understand the Chinese culture. Since the beginning, Motorola is trying to narrow down the gap to appreciate the Chinese culture. The challenge of localizing may foster communication and guan xi with the subsidiary to create havoc for executives from the U.S. headquarters who need to know what is going on at the company in China. Wang and others (2004) stated that friction might develop between Chinese with local education and those with U.S. or European business degree who tend to have more status and higher pay.

Motorola does not have this problem because the skill and knowledge gap between foreign and locally educated workers is diminishing which in turn causing the wage differential to shrink. As conducting business in China becomes more widespread and knowledge of the culture are more acute. The comfort level for corporations is increasing and it is a new willingness to reconsider the prerequisites that multinational once thought they have to lavish upon employees. Wang (2004) started at Motorola, the firm provided elaborate multi course meals at the company cafeteria. By time he left in the 1990's, the organization had begun charging for the meals by issuing employees debit cards that covered part of the price. This shows that technology become advance and changing the working environment.

At the same time, Motorola found that instead of providing buses it is far more cost effective to simply reimburse employees for cab fare. The examples are an indication that Motorola is developing a defter feel for what it takes to keep Chinese employees happy. Motorola has brought the technological advancement in to China and improve people standard of living. Changes in organization are common depending on internal or external forces.

Motorola, a mature and competitive industry has adopted production technology to improve efficiency. The arrows connecting the types of changes in Figure 2 below show that a change in one part may affect other parts of the company (Appendix 2, p 14). Figure 2: Types Organizational Change The success of Motorola is partly attributed to the smart and low cost labour. The supply of cheap labour is practically inexhaustible. The Chinese are smart and the labour cost is low, they earn high remarks from western employer for industriousness and train ability.

As part of its drive to become a world electronics power, China has put huge resources to improve technical and scientific education. According to Tim Chen (2004), president of Motorola in China, the company is fortunate as in 2000, 37% of Chinese university graduates were engineers compared to 6% in United States. However, the drawbacks would be the restrictions on licensing for manufacturing telephone handsets for the China market. Conclusion The term guan xi touches on many East-West cultural differences and it is actually shorthand for the fact that personal trust is more important than legal niceties. This happen not only in China but also throughout the Asia. President of Motorola Tim Chen (2004) agrees that people exaggerate guan xi as it is just a form of trust.

On large scale, China wants foreign investors to contribute to the country's growth and greater integration with the international economy to provide a more favourable investment environment. Thus, Motorola develop greater because joint venture not only survives the price rise in raw material but also captured the market that their competitors left as the price rise. The implication of joint venture experience is that the commitment to a good and long-term business relationship and obligations arising from such a relationship will survive market changes. In addition, China culture ways of conducting business do have an impact on the Motorola's business practices in China. When relationship is built, appreciation of different culture from the East and West are both influential. Success of Motorola in China was not built in a day, the company has spent quite some time in managing its guan xi with China, workforce, market, cultural differences and so on.

As a result, Motorola benefits through expanded market opportunities in China while China benefits by promoting and implementing economic, legal, and regulatory reforms necessary to sustain and promote further economic growth. (2549 words) Appendices Appendix 1 Source: Noble, C. (1997). Asia Pacific Business. Australia: Charles Stuart University Appendix 2 Types Organizational Change Source: Daft, R.I. (2003). Management. 6th en.

Australia: Thomson South Western. O Technology change is the organization's production process on how the organization does it works and design to make the production of a product or service more efficient. O Product change is a change in the organization's product or service output. New product innovations have major implications for an organization because they often are an outcome of a new strategy and may define a new market. O Successful structural change is accomplished through a top-down approach, which is distinct from technology change and new product. O Culture / people change refers to a change in employees' value, norms, attitude, beliefs and behaviour.

Change in cultural and people pertain to how employees think. People change just pertains to few employees such as when a handful of middle manager is sent to a training course to improve their leadership skills. Cultural change pertains to the organization as a whole.

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